Notes about the Recent Performance of Inflation the Interest Rate and the CDT in Colombia.

Inflation for the month of february recently reported by the official source was 13.28%, slightly higher than that of january of 13.25%, which in turn had exceeded that of december of 13.12%. The small increase in february allows some analysts to affirm that it has reached its ceiling and by march the decline is already beginning.

There is also a consensus that for december of this year inflation will drop and close between 8% and 9% due to a reduction mainly starting in the second half of the year. But the central bank's interest rate will only fall when the expected drop in inflation consolidates, that is, it may take several months after the start of the first drop for the central bank to decide to lower its rate. A rate that stands at 12.75% and that analysts consider that one or two 25% increases are still missing in the march and april meetings, still necessary to stop the inflation increases. In other words, assuming that inflation falls from march and for the rest of the year, it is possible that the central bank will only move its rate down at the end of the year, around the meeting in september and october, and thus analysts project that it will end the year at 11%.

Likewise, the banks in turn are going to move down the interest rates of the CDTs. In fact, they anticipated the decline in this rates given the previously announced prospect of lower inflation and central bank rates at the end of this year. In effect, on march 2, according to information from the entity in charge of supervising the financial system, the interest rates of the 90 day CDTs fell to 14.08% from 14.39% in february. Those of the 180 day CDT went to 14.72% from 16.01% and those of the 360 day CDT to 15.64% from 17.2%.

It is difficult to project at the end of the year how much the CDT rates will be, but the truth is that they reached the ceiling last january and in february and march they began to decline and possibly by december they will be around 11%, the same as the central bank rate and slightly higher than inflation. But the situation in the coming year, 2.024, is as follows: inflation at the end of the year projected by the economic authorities and thought centers to be between 3.5% and 5.5%, dropping considerably compared to the current year, and an interest rate from the central bank that It will also drop and according to analysts it will be close to 7% or 8%. Therefore, the rates of the CDT that the banks will offer will also close at levels close to the rate of the central bank, 7%.

Once inflation returns to levels of 2% to 4% already in the year 2.025, the central bank rate may even drop below 3%, also for purposes of economic reactivation for the country and there the CDT rates will be in levels of 5%, which are those that existed in the country in 2.019, before the recession due to the pandemic began in 2.020.

The "reign of the CDT" began in march of the previous year, 2.022, when the 360 day CDT increased to pay interest of 7.49% (the 180 day was still at 5.6%) and the rate rose over the course of the year until having a maximum peak in january of this year when it paid 17.9% and that of 180 days 16.5%, but then it fell in february and march as was shown before and they will continue in gradual decline for the rest of the year. Likewise, they will continue to drop in the next two years until reaching the interest rates of before (around 5%) in 2.025 when the CDTs were not one of the most profitable options as in 2.019 and for more than a decade. There will be three years from 2.022 to 2.024 of the CDT boom with a peak last january in their interest rates.